Fine Arts Fallout

Will local groups get hammered by the post-terrorist hotel tax dive?

On September 11 the board of the Cultural Arts Council of Houston and Harris County planned to approve $7.8 million in grants budgeted for the fiscal year beginning next July. But terrorists had other plans, and CACHH quickly canceled its evening meeting.

Instead, roughly 140 organizations that rely on CACHH for funding received something very different from the arts council: letters warning them of possible budget cuts caused by the fallout from those terrorist attacks.

The alert came because the city's hotel occupancy tax funds the overall arts council budget of $8.6 million. Even though Houston hardly heads most Americans' lists of hot vacation spots, the city had its share of the nationwide drop in hotel business after the terrorism. That decline -- market analyst PKF Consulting put Houston's loss at around 13 percent -- reduces the hotel occupancy tax revenue. It helps pay for everything from CACHH-sponsored museums and theater groups to the city's new arena for the Rockets.

City officials are quick to put a happy spin on the situation, although CACHH was concerned enough to issue the warning to grant recipients.

"We said CACHH with its own internal budget was going to be prudent and find ways to anticipate cuts in funding, if necessary," says interim director Karen Wendler. "And we suggested to the arts organizations that they might want to consider that possibility."

Arts council officials later met with Jordy Tollett, president of the city's convention and visitors bureau, who assured them the city is confident it can make up any loss. Wendler says Tollett directed them to fund the grants as planned. They did.

Tollett says the tax deficit won't be known until after hotels turn over their receipts to the city in January, two months after CACHH begins paying out its new grants. But he would rather take on the role of city cheerleader than worry about a potential funding downturn.

"We're going to have to get on the stick and work harder," says Tollett. "We might be able to make it up if we keep on hustling."

The city intends to go after the convention customers of cities like New Orleans and San Antonio, he says. According to Tollett, those popular destinations had several business conferences booked solid, making it harder to reshuffle them. But now that it's time to reschedule them, Tollett says, Houston has holes in its hotel registries that it is more than happy to fill.

"We're aggressively going after that," he says. "We can take what they can't relocate."

Arts organizations are bracing for the uncertainties of the economic times.

Sara Kellner is executive director of DiverseWorks Artspace, which relies on the arts council for about 4 percent of its budget.

"If it goes down this year we'll deal with it, and if it goes down next year we'll deal with it," says Kellner. She is more concerned that the shaky economy will reduce attendance at events.

"I'm cautiously optimistic," she says. "I would just encourage people in this nutty time to go out to the things in their community that they really love and support them."

Sports venues -- the Rockets' arena, Enron Field and the NFL's Texans Reliant Stadium -- also are affected by hotel occupancy tax revenues, which help finance their construction bonds.

Ric Campo, secretary/treasurer of the Houston Sports Authority, says that financing for the venues is stretched out over several decades, so one month of bad business won't make much difference. Campo points out that even with the oil bust of the late '80s, the money generated by the hotel occupancy tax grew by double digits over the long term.

"One month doesn't make 30 years, and it doesn't make a trend either," says Campo.

The roller-coaster bond market does worry Campo, because the sports authority issues bonds to finance construction. (The authority recently delayed a bond sale, citing market turbulence.) "People who buy bonds are nervous," says Campo. "The volatility of the bond market is of more concern." However, Campo has faith in the future.

"Even when the stocks drop and confidence drops" after a disaster or national emergency, says Campo, "usually within 12 months confidence is back and people are back to normal."

 
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